After an acute political crisis the Papua New
Guinea National Parliament on 14 July replaced Prime Minister Bill
Skate's Government with one led by the former finance official, Sir
Mekere Morauta. The Skate Government had emerged after the mid-1997
elections following the revolt by sections of the military
protesting against the hiring of Sandline mercenaries to prosecute
the Bougainville war. The Defence Force remains factionalised
deeply. Mr Skate's Ministry was itself unstable, with three deputy
prime ministers in two years. It increasingly politicised the
public service, and state activities suffered across the
country.

This Government attracted international
attention after its most senior ministers were videotaped
discussing bribery and thuggery; and other personal scandals
shocked the PNG community. Catholic bishops warned of popular
revolt against declining levels of government services and
increasing social misery and crime. It appeared that the
independence of the Central Bank and the Judiciary had been
seriously compromised. The Parliament had lost its capacity to
effectively check the Executive, and was adjourned for seven months
until July 1999. Senior parliamentarians expressed alarm at the
possibility of the military intervening in politics to support Mr
Skate. By June the Government was close to bankruptcy, with
international banks unwilling to lend to Papua New Guinea because
of its loss of fiscal control.

The Skate Government started imploding in June,
with key supporters abandoning Mr Skate and exposing the
dysfunctional operations of the Cabinet. The Speaker, John Pundari,
complained of politicians interfering with administrative processes
and police investigations; of the lack of ethics in the
manipulation of political parties and the hiring and firing of
ministers and public officials; of the total disregard for
democratic conventions; and the serious deterioration in PNG's
international image adversely affecting investor confidence. Like
other national leaders, PNG academics and writers of letters to the
editor, Mr Pundari identified these issues as affecting the
foundation of 'good governance'.

Eventually the Prime Minister was forced to
accept the reconvening of Parliament and the likelihood of a vote
of no-confidence. In the hope of gaining US$2.35 billion in grants
and loans from the Taiwanese Government, in early July Mr Skate and
Foreign Minister, Roy Yaki, signed an agreement in Taipei to grant
diplomatic recognition to Taiwan. Papua New Guinea's domestic
crisis became an international one, and China's annoyance had the
capacity to destabilise regional bodies and weaken PNG's strategic
situation. After Australia communicated its message to the PNG
Government on this issue it was accused of interfering in PNG
affairs, but PNG commentators eventually decided the Taiwan deal
was a sell-out of national sovereignty.

Mr Skate resigned, apparently hoping to control
the next government to emerge, and the country's MPs engaged in a
prolonged round of political 'horse-trading' as rival leaders
sought to create majority coalitions. After 'yo-yo-ing' from
Government to Opposition, and back, twice, Mr Pundari and his group
helped to create a solid majority in the Parliament for Sir Mekere
Morauta. The Constitution held, the soldiers stayed in their
barracks, and PNG's people are proud of the peaceful and democratic
transition.

The new Government includes many former Skate
ministers. Sir Mekere's election has been welcomed by the
Australian Government and greeted with relief by the international
business community. The Morauta Government has removed several
tainted officials, reaffirmed ties with China and introduced a
mini-budget which cuts 'development' spending. Yet PNG still faces
balance of payments difficulties and a fiscal crisis. After a small
initial grant from Australia to help tide it over, PNG will need
considerable loan funding from the international financial
community to stabilise its economy. However, underlying PNG's
economic management problems there are major challenges of uneven
development and underdevelopment, with limited employment creation
for a rapidly rising population.

Papua New Guinean politicians and commentators
have generalised their country's problems over the last several
years as problems of governance. The country's political system has
evolved in quite dysfunctional ways including the wide spread of
'money politics', which reduces governmental capacity and
undermines the power of parliament and the stability of cabinets to
the extent that constitutional reform is again an issue. This is
what Papua New Guineans usually mean by governance issues, but the
governance concept is generally used differently by many aid
donors. They stress the management aspects of governance in
describing their programs to improve financial administration in
recipient countries, and to promote transparency and accountability
in government, concentrating on the public service. Yet other aid
donors take a more political approach to promoting good
governance.

What happens within PNG can impinge upon
Australia. Its relations with Australia are fundamentally sound,
although complex, and carry considerable historical baggage. These
issues affect the Australian aid program, which has almost
completed a transition from untied budget support to jointly
programmed aid in several key sectors of government activity. PNG
politicians naturally want to control aid flows, and some resent
this transition. Although aid is needed and welcome, there is
always the possibility for confusion when intentions are ambiguous
and for resentment of unintentionally overbearing behaviour by aid
workers. Furthermore, as its programs expand, Australian Agency for
International Development (AusAID) has recently sought to promote
'effective governance' promoting civil society activity and
encouraging democratic accountability. In doing so it might in
future be seen as intrusive by PNG politicians, who see
'governance' as their own sphere.

Introduction

Political Changes and Governance
Issues

After Prime Minister Bill Skate resigned on 7
July and the National Parliament elected Sir Mekere Morauta a week
later, Australian media comment stressed the unpredictability of
politics in Papua New Guinea (PNG). This is a young country of 4.5
million people spread over hundreds of islands which rejoices in
the tourist slogan 'Land of the unexpected'. PNG is a place
where-in addition to geological upheavals-instability has often led
to ill-considered decisions and reduced the capacity and authority
of governments.(1) Such problems tend to be self-perpetuating. They
were manifest in the March 1997 political crisis which last
attracted international attention to Port Moresby-when the hiring
of the Sandline mercenaries for military training and use against
Bougainville secessionists was opposed by core elements of the PNG
Defence Force (PNGDF).(2) This in turn prompted large
demonstrations outside Defence Headquarters and Parliament House,
and the combined pressure forced Sir Julius Chan to suspend the
Sandline contract and step aside as Prime Minister pending a
judicial inquiry.(3) Bill Skate, the pre-eminent critic of
Sandline, used the issue when campaigning for the prime
ministership in July 1997; the splits and alliances from this
period have permeated PNG politics ever since.

Bill Skate's period in office was eventful,
outdoing PNG's previous political turbulence. Having pushed through
his harsh yet partly unfunded 1999 Budget, on 4 December 1998 Mr
Skate used his numbers to adjourn PNG's National Parliament for
over seven months. The effect of this was to delay by five months a
motion of no-confidence which the Opposition had predicted for
early 1999. From early June 1999 the Skate Coalition was in its
dying throes, with new parties and alliances conceived and buried
within days. This frenetic phase climaxed in early July with Mr
Skate seeking funds in return for diplomatic recognition of Taiwan.
Mr Skate then resigned, perhaps to avoid parliamentary humiliation,
but also to increase his chances of controlling whatever government
emerged. The struggle culminated with the last minute double
floor-crossing manoeuvres of the former Speaker, John Pundari,
whose supporters ultimately held the balance of power. Like an
opera, this saga ended quietly with almost the whole Parliament in
unison supporting a new Prime Minister. PNG has many doom sayers in
Australia,(4) but we can say that its political turmoil is only
unpredictable for those foreigners who are not watching. In 1999
the problems in the independent State of Papua New Guinea extend
far beyond the Port Moresby elite.

For most of the last two decades Papua New
Guineans have expressed concern at the state of their nation. This
starts with the occasional habit of governments to make
unappropriated large-scale expenditure. Corruption by politicians
has been demonstrated often in Leadership Tribunals, causing twenty
parliamentarians to lose their seats. Imprisonment has not
prevented MPs returning to the ministry. For years, there has been
public outcry at the steady and now rapid decline in government
capacity and services throughout much of the country. In rural
areas, public anger and frustration have gone beyond local disputes
and inter-clan or tribal fighting to vandalism against government
buildings. One aspect of the state's response has been violence
against citizens by police attempting to gain 'respect'.(5)
Perceived and actual levels of crime and violence are rising,
especially armed robberies and rape, which over many years have
provoked huge public demonstrations usually led by women and church
people. Women also have led demands for peace on Bougainville. In
Port Moresby Bill Skate's Prime Ministership will be most
positively remembered for his encouragement of the Bougainville
peace process.(6)

In the 1990s public despair about politics has
prompted many ordinary people and leaders to join Christian
revivalist movements. Anguished rhetoric about corruption has
dominated elections since 1987. In late 1996 the then
Governor-General, Sir Wiwa Korowi, led several prominent political
figures in the Brukim Skru (kneel down for forgiveness) campaign
which prayed that a clean government would emerge in the 1997
election. Near Parliament House a huge billboard proclaims the
Proverb 'When the righteous are in authority the people rejoice,
but when the wicked rule the people suffer'.(7) Nowadays that sign
is rather weather-beaten, and public discourse more mundane with
its concentration on governance.

'Governance' is a catch-all term which broadly
encompasses 'the act and manner of governing'(8) including both
political and administrative elements of government. In the 1990s
the global cry for 'good governance' has been promoted by aid
donors and duly echoed by aid recipients. The meaning of this buzz
word depends on the user. The World Bank, prevented by its charter
from political intervention, tends to use governance to emphasise
sound economic management and administrative probity, including
transparency. To this end the Bank in recent years has sought to
foster a strong civil society, namely the non-state political
actors.(9) Another rather vague term, 'the civil society', refers
to people organised outside the state. It includes churches and
other community-based and non-government organisations (NGOs),
which can be seen as linking society with the state, like the media
in their roles of scrutiny and publicity. Yet in a country like
PNG, the nascent civil society paradoxically involves public
servants and soldiers.(10) In practice, the term carries highly
political connotations, and state leaders can resent their critics
in the civil society. Some Western bilateral donors like the United
States quite frankly stress that good governance demands the
democratic institutions of responsible and responsive government,
and accountability requires participatory politics. More cautious
aid donors imply that governance is a more technical and
administrative field, glossing over the political agenda implied in
governance programs.

The Australian Agency for International
Development, AusAID, explicitly promotes a strong civil society,
but in its current aid program does not discuss the political
implications inherent in its governance programs.(11) A recent
AusAID article concentrates upon 'Effective Governance', which it
says 'means competently managing a country's resources in a manner
which is open, transparent, accountable, equitable and responsive
to people's needs'.(12)

In PNG political debate since early 1998 the
fashionable diagnosis has been that the country suffers from poor
'governance'. (13)Educated Papua New Guineans often use this
terminology when discussing corruption. The term is used in
different ways in differing context but is always intensely
political. PNG commentators have tended to generalise their
country's recent difficulties as the absence of good governance,
and sought 'a good government', one which is 'honest, transparent
and principled'.(14) Since Sir Mekere Morauta's election there has
been an outpouring of relief in the PNG media, messages of
international goodwill and of hopes that PNG can now create good
governance. Meanwhile, other voices in both PNG and Australia have
warned that the problems manifest in PNG's way of doing politics
are deep-rooted, and that-as well as political will-great patience
will be required by all. Governance issues as seen in PNG go right
to the core of politics.

In examining these issues this paper has eight
sections. Following an introduction, the second part outlines the
origins and early days of the Skate Coalition, the effects of
politicisation on the public service, the military and police, and
notes several major scandals involving politicians. The third part
surveys deteriorating social and economic conditions in PNG faced
by the Government, and its economic mismanagement culminating in
the 1999 budget. The fourth part examines political concern in
early 1999 and fears the Constitution could be challenged. These
worries included statements by Catholic bishops warning of public
disquiet and calling for the Government to resign, and MPs
expressing alarm that the security forces might intervene in
politics; this in a context where Parliament had been adjourned for
months and quite marginalised by the Executive. The fifth part on
the mid-year crisis in government describes the Skate Government
self-destructing. The Government's desire for a 'quick fix' was
exemplified in the decision (not formally carried out) to recognise
Taiwan instead of China, with all the potential problems that could
have created for PNG and its neighbours. The sixth part describes
the political climax of 'horse-trading' in the run-up to an
expected vote of no-confidence and the anti-climax when the
parliamentary vote was taken in a peaceful atmosphere. The seventh
part notes the appointments to the new Morauta Cabinet and
highlights several early decisions of that Government. The eighth
part notes the ongoing challenges facing PNG and points to the
continuing institutional and socio-economic factors which
contribute to PNG's sometimes dysfunctional political system and
problems of governance. The paper concludes by noting some of the
implications of recent trends for the Australian aid program,
especially its focus on governance, and-despite its necessity-the
ambivalent attitudes found in PNG towards aid.

Since self-government commenced in December 1973
PNG governments have been coalitions of up to six parties. These
'political parties' are actually personalised factions centred
around wealthy and powerful individual leaders. There is usually no
policy foundation but often some regional base. Over half the 109
MPs are replaced after each five year term. Most new MPs are
elected as Independents but quickly join parties to recoup their
electoral expenses. Some once-prominent parties, like United and
National, may now have only one member. Others are divided, with
members on both sides of the House. Ten parties have been involved
in government since 1997 (see Table 1).

Bill Skate, a former accountant, parliamentary
Speaker (1992-94) and Port Moresby Governor (1995-97), gained the
prime ministership in July 1997 after the national elections which
ousted the incumbent Prime Minister Sir Julius Chan and his
predecessor Paias Wingti. New MPs are financially stretched just
after elections in PNG and this is a time when their votes if not
loyalties are-literally-sold in blatant 'horse-trading'.(15) People
from Papua (the southern region) had long argued it was their turn
to lead a government which helped Skate. Aided by Wingti and Chan,
he collected together a large group of MPs to a well-guarded 'camp'
(or lock up) at Tufi in Oro Province.

Initially the Tufi group offered their
leadership to Sir Mekere Morauta who, like Bill Skate, comes from
the Gulf area of Papua. A long-serving Secretary for Finance and
Governor of the central Bank of Papua New Guinea, Sir Mekere had
been removed from that post by Chan and in March 1996 had publicly
named corruption and 'slush funds' as major problems in PNG.(16) He
had also signed the 'Citizens' Letter' in March 1997 which called
for the termination of the Sandline contract and for the
responsible ministers to step aside.(17) A freshman politician
among some tough operators, Morauta declined this offer of the
prime ministership, apparently because Skate's team included people
from PPP and Pangu, parties with which Skate had said he would
never form a coalition. Morauta moved to the rival National
Alliance camp at Madang, which included many talented people
gathered together by the country's first PM and former Pangu
leader, Sir Michael Somare. Despite a somewhat tarnished
reputation, Somare insisted on being their candidate as PM. This
weakened the National Alliance grouping, enabling Skate to win
power by 71 votes to 35, greatly assisted by the heavy involvement
of Wingti and Chan.(18)

Bill Skate had been the first and strongest
parliamentary opponent of the Sandline deal. As Governor of Port
Moresby he had used the resources of the city's government, the
National Capital District Commission (NCDC), to feed the soldiers
during their protests.(19) An anti-Sandline alliance was promoted
in March 1997 by leaders associated with Melanesian Solidarity
(known as Melsol),(20) and related bodies.(21) Some Melsol leaders
were elected on anti-Sandline and anti-corruption tickets, and
there is one report that some thirteen pro-Melsol Independents
backed Skate's new Coalition,(22) helping counteract the political
malodour caused by ministers from the Chan Governments. As Deputy
PM and Finance Minister under Chan, Chris Haiveta had driven
through the Sandline contract and US$ 18 million initial half
payment in ways which attracted strong criticism from the first
Commission of Inquiry.(23) The new Government comprised Skate's own
People's National Congress (later reborn as the PNG First Party),
Haiveta's faction of Pangu Pati and those remnants of the Chan's
People's Progress Party (PPP) and the Wingti's People's Democratic
Movement (PDM) which had survived the election.

Skate committed his Coalition to transparent and
clean government but the public credibility of this claim was
weakened by the return of key figures from previous governments.
Many NGO activists were outraged by their leaders' apparent
abandonment of their ideals in following what was seen as their
crude lust for power.(24) Once in power and safe under the
Constitution from potential votes of no-confidence for 18 months,
Skate attracted more MPs, especially from the Highlands, apparently
seeking the benefits of office. This is a standard pattern at this
stage of the PNG parliamentary cycle. Skate sacked Haiveta in
December 1997, whereupon Morauta and the former PM and Speaker, Sir
Rabbie Namaliu, crossed the floor. These highly respected men hoped
to improve the quality of decision-making in a Government with at
least a year to run, but also found themselves accused of
opportunism.

The Government soon created difficulties for
itself by politicising senior levels of the public service far more
than had any previous government. Under 1986 legislation, ministers
can control senior appointments and the Skate Government crudely
used these powers to replace many competent and experienced senior
officials with its own less qualified political clients. This 'jobs
for the boys' style may have short term political benefits, but the
appointment of too many deprived the Ministry of talented servants,
corporate memory and frank advice. With several departmental heads
seen as politically compromised 'yes men', professional civil
servants were demoralised and spoke of their acute insecurity.
These problems were greatly worsened by constant changes in the
Ministry. There were three Deputy Prime Ministers and three Finance
Ministers in Skate's 23 months of power. The central bank, the Bank
of Papua New Guinea, is the key to financial stability because of
its control over currency, credit and overseas transactions, a role
which requires political independence. However by late July 1998
the Bank had its third Governor in three months. By early 1999 few
departmental heads had held their jobs for more than a year and
observers described a climate of fear in the bureaucracy.

There was particular concern over what are
constitutionally called the Disciplined Forces,(25) but better
known as the security forces. The Defence Force, long
politicised,(26) had become increasingly factionalised during the
1990s. Sir Julius in 1994 had appointed Brigadier-General Jerry
Singirok as Commander and then sacked him during the Sandline
crisis. In the weeks before the 1997 election Chan appointed
Colonel Leo Nuia as Commander. As Brigadier-General, Nuia proceeded
to relocate members of the Special Forces Unit which Singirok had
used in ejecting the Sandline mercenaries. In August 1997 Mr Skate
opened a second Commission of Inquiry into the Sandline affair,
which as well as raising doubts about Chan Government Ministers,
served to increase tension in the PNG military. Certain
pro-Singirok officers still faced charges-which were only dismissed
in late July 1999-arising from their alleged intervention in the
1997 election.(27) Some of these men in battle dress liberated one
of their leaders from a cell at the Boroko Police Station on 28
July 1997, and then mutinied, holding Nuia under house arrest until
the Prime Minister negotiated his release.(28)

The PNGDF was brought into politics in October
1998 when, as part of a wider reshuffle, Skate replaced Nuia with
Jerry Singirok. This was controversial, because in June 1997,
although a private citizen, Singirok was reported to have allied
with Melsol leaders and endorsed the election campaigns of Melsol's
anti-Sandline leaders.(29) His reappointment as Commander was made
without cabinet backing and despite the commencement of sedition
charges arising from his leadership of the Sandline revolt.(30) In
addition, the Ombudsman had commenced an investigation under the
Leadership Code of Singirok's receipt of K72 000 (31 000
pounds) from the British military supplier, J. and S. Franklin,
which Mr Skate dismissed as 'only 70 000 lousy kina'.(31)
Singirok was now seen by many as quite beholden to his patron and
protector, Mr Skate, to the extent that there were rumours he might
use force in support of the Prime Minister. Singirok promptly
denied he would do favours for the Skate Government. Several former
Defence Force commanders wrote publicly to the General suggesting
he step aside. In 1999 the Commander used the budget requirement to
downsize the force to conduct what were seen as factional purges in
the PNGDF.(32)

Another key early appointment was that of Police
Commissioner. The previous Commissioner, Bob Nenta, had refused to
join the Sandline revolt and was sent to Singapore as High
Commissioner. He was replaced by Peter Aigilo, a former junior
officer who had earlier quit the constabulary. Then Chief
Superintendent John Wakon, who had been vigorous in his handling of
the Singirok case and another alleging insurance fraud by Skate
himself, was first suspended then sacked early in 1999, and his
investigation team disbanded. The Police Association unsuccessfully
fought this move through the courts.(33) The Royal PNG Constabulary
was also clearly becoming politicised, to the benefit of those like
Skate and Singirok whose cases were set aside.

Major scandals surfaced in the Government's
first year.(34) Most visibly for Australians, in late 1997
Australian ABC TV ran extracts from surveillance tapes recorded by
one Mujo Sefa, an Australian businessman closely associated with
Skate, in which the Police Minister Thomas Pelika and Mr Skate
appeared to be discussing political bribes. More definitively, the
tapes showed the PM boasting about a gangland killing and debating
with his Deputy, Haiveta, over who was the 'Godfather' of Port
Moresby.(35) The role of the Australian media enabled the affair to
be portrayed as meddling by the former colonial power, which helped
Skate avoid the issue. He excused himself, saying it was the whisky
talking. Skate and the Opposition Leader, Bernard Narokobi, traded
full-page statements in the press about the matter,(36) but
Parliament was not recalled. Seeking another scapegoat, Skate
sacked Haiveta (in front of Australian TV cameras) for allegedly
setting him up and also removed the PPP leader Andrew Baing, moves
which split both the Pangu and PPP parties. A police investigation
which cleared the Ministers of the bribery allegations was
described by Narokobi as a sham. Parliament did nothing; the matter
lapsed apart from newspaper correspondence recalling the incident
as shame-making for the nation.

Another scandal was similarly brushed aside.
This involved an amateurish video, initially tabled in Parliament,
which shows the Deputy Leader of Skate's PNG First Party having
sexual intercourse with an underage girl. It was alleged the tape
had been used to blackmail the PM's party to ensure a businessman
and former politician received a K6 million loan to suppress
the video.(37) Because PNG's Constitution provides for an 18
months' period of 'grace' in which a new prime minister cannot be
challenged by a motion of no-confidence, Mr Skate was able to
outface the small and rather ineffectual parliamentary Opposition.
Then in July 1998 certain Government figures were privately but
reliably reported as organising a prolonged orgy at Wabag in Enga
Province. An outspoken talkback program on the Government's FM
radio station was scrapped, although editorials, letters and
cartoons in the press revealed continuing public outrage at stories
of abuses of power, greed and moral turpitude by leaders.(38)

Yet another matter involved the city government.
In June 1997, while Governor of Port Moresby and campaigning as an
anti-corruption crusader, Mr Skate had initiated an investigation
of the NCDC's affairs by an Australian corporate investigator, Joe
Noonan. A former detective, Noonan claimed to have uncovered fraud
worth A$30 million before fleeing the country in fear of his life.
The investigation had been stopped after a prime ministerial
adviser repeatedly told Noonan not to initiate criminal
prosecutions. The new Governor of Port Moresby, Philip Taku, a
former police officer and Skate ally, reportedly instructed Noonan
not to prepare a final report and terminated his services. One
expatriate supervisor had claimed 'his boys' working as security
guards at an NCDC yard were 'better armed than the police' and, to
use a polite word, messing with him would involve messing 'with the
Prime Minister and his boys'. Mr Noonan gave The Sydney Morning
Herald 'an extraordinary account of a city administration
ruled by terror where his six-month investigation was sabotaged by
official intervention, violence and threats including the
near-death bashing of one of his key informers'. Mr Noonan left the
country after a threat he would be next in line.(39) The employment
of criminals at NCDC has long been rumoured in Port Moresby but
this matter also quietly disappeared.

The second Commission of Inquiry in late
September 1998 reported the Sandline contract as executed by Mr
Haiveta did not follow lawful procedures. It also found Mr Singirok
had had no lawful justification to order the contract aborted. It
confirmed that he had received funds from J. and S. Franklin but
did not uncover any secret commissions or bribes. The Commissioners
reported that Sandline had made improper payments of US$500 000 to
persons unknown, and evidence of another US$1.8 million payment
made on receipt of the US$18 million.(40) Regarding Mr Haiveta, the
commissioners said 'His credibility is brought into question. By
necessary implication, Mr Haiveta may have had something to
hide...', and concluded 'that money he transmitted from Switzerland
was a corrupt and improper payment'.(41)

Mr Haiveta, who was still challenging the
inquiry process in the higher courts, responded by saying the
Inquiry was biased, and denied receiving any funds from
Switzerland. He claimed that the present Prime Minister (Mr Skate)
had orchestrated 'the civil unrest on 17 March 1997' (the date
the PNGDF Commander moved against Sandline and called for the
Ministers involved, including Haiveta, to resign). He cited 'other
scandals' under the Skate Government, including the diversion of K8
million of drought relief donations to cover public servants' pay
increases. Mr Haiveta stated that the PM had attempted to
intimidate the judiciary, and had permitted a cowardly
parliamentary attack on the Chief Justice.(42) In a press release,
the Prime Minister attacked Sir Julius Chan as 'ultimately
responsible' for his Ministers' conduct. 'Our great nation of Papua
New Guinea has been plundered and pillaged by a scattering of
politicians and corrupt leaders and we want this sad chapter to be
closed.' He then called for an Independent Commission Against
Corruption (ICAC), saying 'if you have nothing to hide you have
nothing to fear'.(43) Soon after, Mr Skate expelled Chan's PPP from
the Government and at the same time removed Chan's appointee as
PNGDF Commander, General Nuia. The ousted Deputy PM and Finance
Minister, Michael Nali, complained of Skate's 'rock and roll,
whisky' style of governance. The Port Moresby political community
was shaken. Mr Skate felt obliged to deny he would remove the Chief
Justice,(44) and the next month comfortably reasserted his control
of Parliament.

Papua New Guineans criticise governments for the
overall decline in their living standards and in public order.
Rates of population growth have outstripped economic growth for two
decades, which means there are fewer resources for most
people-setting aside for the moment the declining effectiveness of
the national public service, which has barely expanded since
1975.(45) The benefits of development are unevenly spread and at
the grass roots rural people have few services.(46) Since 1992
governments have focussed their energies on the minerals sector and
dissipated unwisely much of the windfall revenue from gold and
oil.(47) Ideally, government services should reach people through
the subordinate provincial governments covering the nineteen
provinces and the national capital but their share of state funds
has declined steadily since 1978. When the national government has
suffered sharp falls in revenue, like that in 1990 following the
closure of the Bougainville copper mine, the provinces have carried
the largest share of cutbacks, especially in funding for health and
education. Since Independence in 1975 health indicators have
worsened and services deteriorated badly, even in the cities.(48)
Until recently major issues like the spread of HIV/AIDS have not
been acknowledged by politicians. Other transmissible diseases like
typhoid fever are now common in urban areas. The physical
infrastructure, especially rural health clinics, schools and feeder
roads, is seriously degraded after more than 20 years of neglect.
Water and power supplies in towns are unreliable and in most rural
areas are still not available.

Paid employment is limited in rural areas and,
as in the towns, high unemployment and lack of economic opportunity
are seen as the prime cause of crime.(49) The police force is
under-trained and under-funded and has grown little despite the
national population of 4.5 million having nearly doubled since
Independence. Personal insecurity, especially fear of sexual
violence felt by women, is a real concern.(50) This combination of
limited state capacities and a divided society leads to the
weakening of the authority of the state.(51) While he was Speaker,
Sir Rabbie Namaliu spoke of 'growing public cynicism about their
political leaders' in PNG-noting the same occurred in all
democracies.(52) These major issues have combined to deter
investors, thus reducing the prospect of employment growth and
reinforcing the whole negative process. Clearly, the PNG state and
society face major challenges in many spheres.(53) These are the
issues Papua New Guineans raise most often under the label of
governance, and they blame their leaders.

Effective economic management proved to be
beyond the Skate Government, although many problems in its first
year were clearly caused by factors beyond its control.(54)
Following PNG's self-induced fiscal crises of 1994 and the World
Bank-International Monetary Fund Structural Adjustment Programs of
1996, the Skate Government inherited a small budget surplus (K15.4
million) in 1997. However the country was soon faced with the
consequences of the 1997 Highlands frosts, effecting crops such as
coffee, and the 1997-98 nationwide drought. The A$30 million
Australian food relief effort in remote areas was successful. The
country's need for aid was resented by some leaders. However, Skate
agreed that PNG had mishandled distributing food in areas
accessible by road, which were the responsibility of the PNG
governments, national and provincial. The drought seriously reduced
export revenues from agricultural commodities and earnings from the
Ok Tedi copper mine, which shut down for 6 months, and the Porgera
gold mine. In the 1990s minerals have usually provided around 70
per cent of PNG's exports, but prices dropped with the Asian
economic crisis. The lucrative activities of Asian logging
companies in PNG also dropped by about half, whereupon, under
pressure from the loggers, PNG ceased taxing the majority of
logs-those valued at less than K130/cubic metre.(55) In 1998 the
government had a large deficit (K137.4 million). The natural
disaster of the tsunami at Sissano (Aitape) in July 1998 had little
economic impact, despite costing over 2000 lives, but did preoccupy
the Government and dramatically demonstrated the limited capacity
of the PNG state to help its own people.

Poor Economic Management

It was poor fiscal management which took the
1998 budget into a K300 million deficit. In 1998 many provinces
received their annual operating funds nine months late, and many
schools shut down early for lack of operating funds. The Government
was borrowing heavily from the commercial banks and inflation grew
from 5.3 per cent in 1997 to 21.8 per cent in 1998.(56) Treasury
bond and commercial bank interest rates were lifted above 21 per
cent from June 1998 and were still above 18 per cent in July 1999.
The PNG economy is very open and relies heavily on imports.
Currency fluctuations translate quickly into domestic effects,
including rising prices of the food staples of the urban poor.(57)
The Kina had been at parity with the US dollar (and at A$1.50) in
1994 before losing a third of its value after it was floated in the
September 1994 fiscal crisis. Its value fell 20 per cent for the
year to September 1998 and reached US$S0.47 at year's end. In 1998
PNG had a balance of payments deficit of K264 million. In the first
half of 1999 exporters were reportedly deferring repatriating their
earnings in order to retain their value in harder currency. The
Kina was falling sharply and reached US$0.29 and A$0.40 in early
June 1999,(58) but by the change of government was fairly steady at
US$0.38 and A$0.57. The central Bank used up K60 million of the
country's declining foreign reserves to prop up the currency in mid
year and the country faced a severe balance of payments crisis with
limited import cover.

The 1999 Budget was a definitive sign of the
Government's inability to manage the economy. Expenditure was to be
K2097 million, with a projected deficit of K80 million, but the
Budget lacked credibility. It purported to hugely increase
development funds (which should be capital investment), but most of
this increase was disguised recurrent expenditure, especially the
electorate funds. In July 1999 the PNG Government introduced a
uniform 10 per cent value added tax (VAT). Business people and the
public were ill-prepared, and annoyed. So the Prime Minister
decided to defer the introduction of the VAT but the Tax
Commissioner refused to comply. Although both regressive and
initially inflationary, this consumption tax will widen the tax net
and may help provinces which are giving up some minor sales taxes
for a promised share of the VAT. The carrot for parliamentarians to
pass the Budget was the offer of K124 million, over K1 million per
MP, in electorate development funds.(59) Such 'slush funds', as
they are known, started on a small scale under Prime Minister
Somare in 1983. In 1999, the Government paid K500 000 to all
its 62 members but did not pay the Opposition's 36 members.
Outraged at this discrimination, they persuaded the National Court
to order payment.(60) Few MPs pass their slush funds on to
provincial and local-level governments, whose cash flow has been
unpredictable at best since the 1995 'reforms'. In recent years
provinces have lacked the means to deliver basic health and
education services or to maintain infrastructure. Salaries and
operational funds have also been cut for the Christian church
agencies which are contracted to provide health and schooling
services in many rural areas where the state has little presence.
The twenty provincial governments suffered cuts of K115 million in
1999, after a hard year in 1998.

This Budget made harsh cuts but much of its
revenue projections appeared dubious. The impact was immediate. The
Police and Defence forces suffered 10 per cent funding cuts
requiring downsizing. Universities lost 20 per cent of their grants
and closed whole teaching programs. The Budget demanded cuts of 20
per cent in public service employment, requiring the retrenchment
or retirement of 7000 public servants, well beyond the 2000
recommended by the World Bank. The K65 million retrenchment costs
were not funded. As a result some agencies, including Health and
Lands, were taken below the staffing levels needed for core
operations. By early 1999 many provinces were hitting the wall,
unable to pay staff or operate services. Yet there was still a
major gap on the revenue side. The Budget projected tax inflows of
K416 million from the minerals income stabilisation fund, which may
occur, but also relied on US$100 million of extraordinary financing
associated with the Structural Adjustment Program. In addition the
Government hoped for a US$120 million commercial loan from Europe
which was announced in 1998 but never appeared, and sent a
'roadshow' overseas, seeking to make a bond issue of US$250 million
both to fund the Budget and reduce domestic debt.(61) So this
difficult Budget was posited upon receiving around K350 million in
foreign loans, which had not come by mid-year.

The 1999 budget was put together by Skate's
Chief Economic Adviser, Dr Pirouz Hamidian-Rad,(62) working from a
hotel room.(63) He had previously been the World Bank's PNG country
manager from 1996, in which role-seeking inputs from outside
government-he had formed a close alliance with Melsol leaders such
as Peti Lafanama, who was elected MP in 1997.(64) Hamidian-Rad's
consultancy firm Ikub had a two year K7 million contract to
provide economic advice to the Government. The Government accepted
the consultant's advice, against the early protest of some top PNG
officials, like the Governor of the Bank and the Secretary for
Finance, who were both replaced. The Ikub consultancy was widely
believed in PNG political circles to include as shareholders and
employees some of PNG's most senior economic managers and/or their
family members. An accountant by background, Hamidian-Rad seemed to
overlook complexities in his attempts to balance the books. Thus in
order to save around K7 million, the budget defunded and appeared
to abolish fifteen statutory bodies including invaluable research
institutes,(65) some of which in health and agriculture were the
channel for tens of millions of dollars of foreign project
assistance which was thereby foregone.

Since July 1998, Hamidian-Rad had claimed that
PNG had no need for World Bank or International Monetary Fund (IMF)
support. It is noteworthy that the World Bank from October 1998 had
declined to release Structural Adjustment Program funds or
negotiate with Papua New Guinea while Hamidian-Rad remained in the
PNG team. This was because of a clause in his previous contract
intended to prevent conflict of interest by prohibiting immediate
employment by the Bank's clients. Rather than remove him from its
team, PNG looked elsewhere for funds. Known as 'the 7 million Kina
man', Dr Hamidian-Rad proved very expensive for PNG.(66)

Searching around for US$300 million, PNG
officials found that commercial banks in Europe would not lend
money or buy government bonds. The Sandline company played a role
here, in its efforts to force PNG to pay the second half of the
US$36 million fee for the aborted 1997 contract. Sandline brought
legal action in Brussels which tied up Euro 13 million (A$21.5
million) of European Union aid. Sandline also blocked funds for
companies trading with PNG, effectively closing off PNG's access to
alternative sources of funds. Eventually PNG agreed to pay Sandline
US$13.3 million and let the company keep the US$12 million of
military hardware which had been stored in Australia. Legal fees
were crippling, and Mr Skate said that PNG paid up as it would have
spent K120 million (A$76 million) on this futile exercise, and
would have been prevented from raising the funds it was seeking in
Europe.(67) Indeed foreign lenders were deterred by the
Government's stand-off with the World Bank and International
Monetary Fund, and the Bank's public warnings of the country's poor
fiscal record. The government had no obvious way out of the fiscal
crisis.

The deteriorating situation led to an
extraordinary intervention in April 1999 when the Catholic
Archbishop of Port Moresby, Brian Barnes, used his Easter message
to call on behalf of church members for a change of government to
save the country and people from suffering and disaster. He cited
poor economic management leading to inflation and suffering, lack
of money, a breakdown in the delivery of goods and services,
unethical and immoral behaviour among leaders and rising
unemployment and crime as factors that necessitated new national
leadership. The Bishop said 'Corruption has begun to seep in and is
growing quickly' and was providing an excuse for crime. He called
for the creation of an ICAC. (This idea had lapsed after the
Government sent its principal advocate to be PNG's Ambassador to
the United Nations on an unusually lucrative contract.) Archbishop
Barnes, after 30 years in PNG, warned that a popular uprising could
be triggered by the current situation.(68) Although he was bluntly
told to 'butt out' of politics by several Government Ministers, and
also a Pentecostal preacher close to Mr Skate, the Archbishop
received considerable support in the correspondence columns and
newspaper polls and was backed up by the Catholic Bishops'
Conference. Eventually he and Mr Skate had a cordial meeting and
the issue dropped off the agenda.

Early in 1999 close observers of Port Moresby
politics privately reported that Bill Skate was losing influence in
his Papuan base areas such as his wife's peri-urban village of Pari
on the outskirts of Port Moresby. However the Prime Minister at
this time seemed to retain a strong position in Port Moresby
overall. One well-connected Papua New Guinean political
participant-observer provided a tough-minded analysis on a
non-attributable basis. The argument was that the Prime Minister
had effectively rendered irrelevant the institutions of
parliamentary democracy in PNG and might be immovable. Bill Skate
was believed to dominate the top police and military, key
ministries, the central bank, the Port Moresby city administration
and some of the judiciary(69) and to have the backing of prominent
Pentecostal Christian preachers. Further, it was said, he had
instilled a climate of fear in the public service and had well-paid
political enforcers within settlements as far as the Eight Mile
settlement of immigrant Highlanders, who could deter people from
demonstrating against the Government and also mobilise crowds in
its support. By this analysis Skate controlled the key levers of
power and was untouchable. As we now know, this did not occur, but
the mind set behind such a scenario indicates the type and level of
concern prevalent in Port Moresby early in 1999.(70)

Clearly the country was facing a major crisis in
government and some parliamentarians also feared a worst case
situation. Seventeen MPs from the New Guinea Islands region (known
as the G17) met in April to discuss their concerns and several
wrote to the Prime Minister with a warning that 'elements of the
security forces might be planning to intervene in politics if they
do not find the result of a possible parliamentary vote of
no-confidence acceptable to them'. Veteran Rabaul MP, Sir John
Kaputin, referred to a 'widespread perception that elements of the
security forces ... might provide them with a pretext for
intervention'. Government Ministers from the region rejected these
statements as lacking a mandate from all the G17 but such concerns
were echoed by Opposition Leader Narokobi.(71) Despite denials by
Skate, the Defence Minister Peter Waieng and General Singirok
(after he had spoken with former Commander, Ted Diro, MP), Mr
Narokobi repeatedly spoke over the next two months of his fears of
police and military intervention in politics.(72) General Singirok
as late as 11 July felt impelled to pledge that the PNGDF would
uphold the Constitution.

Indeed a coup was seen as unlikely in 1999. The
PNGDF has appeared to lack either the capacity or political stature
to take over national government since its limitations were shown
in its handling of the Bougainville secession crisis. The coup
possibility has been raised in Port Moresby's over-heated political
discussion occasionally in the last two decades,(73) but usually
ruled out because of rivalries between the two security forces.
Combined operations on Bougainville since 1989 and similar budget
problems have reduced the tension and rivalry between the two
security forces(74) yet they do not always act together-as was
shown during the Sandline crisis. Both forces have been deeply
demoralised and factionalised lately, itself a matter for concern,
but one thought to make political intervention less likely. Some
observers doubted that the police force would follow Commissioner
Aigilo in any action to support Mr Skate. In the month before the
July parliamentary vote there were rumours that large numbers of
firearms were held by supporters of some prominent politicians, and
could destabilise the city. In early July senior police confirmed
reports of unregistered weapons and threats against
politicians.(75) If, for whatever reason, there had been a
breakdown of public order in Port Moresby necessitating a State of
Emergency, as was declared in 1996, the Constitution requires the
reconvening of the National Parliament.

The seven months eleven days adjournment of the
National Parliament from December 1998 indicates the Executive's
dominance of the legislature and also poor consultation on
essentials between the Government and Opposition. In late November
1998 the Government considered using its numbers to force a 12
month adjournment of Parliament.(76) Angered, Opposition members
managed to seriously undermine the Bougainville peace process by
blocking a constitutional amendment designed to facilitate the
creation of a Bougainville Reconciliation Government (BRG).(77) The
BRG would have precluded MPs for Bougainville from having the
dominant roles in the province which, under the 1995 provincial
government reforms, MPs have elsewhere. Opposition leaders
reluctantly supported the amending Bill, as part of the peace
process but other Opposition members absented themselves. The Bill
lacked the required three-quarters absolute majority so the
constitutional amendment failed. This major disruption of a
delicate political manoeuvre incensed Mr Skate, who rightly counts
the Bougainville peace process as an imperative for Papua New
Guinea and as his Government's finest achievement.(78) However the
amendment might have passed if Parliament had met again, and
perhaps that is what Opposition members wanted to force. Skate
angrily ignored that opportunity and-having obtained supply-forced
through the long adjournment, blaming the Opposition.

The dominance of the Executive arises from the
electoral insecurity of MPs. Local members are desperate for funds
for their electorate, their immediate supporters or themselves.
Part of the rationale for 'slush funds' has been the declining
capacity of provincial governments, which is worsened by losing
around half their potential budget to MPs. Cash for MPs can only
legitimately come from the government, which gives prime ministers
immense control if they manage well the incessant demands of this
'system'. Only when the prime ministership is in question do MPs
have real bargaining power. This situation has developed over two
and a half decades but the parliamentarians can only blame
themselves for their loss of role. Despite frequent and often
poorly grounded motions of no-confidence between 1978 and 1991,
oppositions in PNG have not provided effective scrutiny of
government. The national budget is usually passed after only a few
hours' discussion and rarely challenged. Nor do parliamentary
committees work effectively. They are entrenched in the
Constitution but rarely meet,(79) except for the Public Accounts
and State of Emergency committees. Committee chairmanship is
regarded as a perquisite equivalent to membership of the executive.
This situation has been exploited by prime ministers since 1992.
One expert observer says that the PNG parliament as a whole has
been 'totally suborned by the executive'.

A constitutional lawyer who in the 1970s advised
on the creation of the Constitution, Professor Yash Ghai, argues
that the courts and the Ombudsman Commission are 'the redeeming
features of PNG's constitutional system. They have prevented the
decline of the executive and parliament into total irresponsibility
and unaccountability'.(80) The Chief Ombudsman, Simon Pentanu, is a
former Clerk of the National Parliament who knows his former
masters well and he too recently argued that parliament has almost
become a rubber stamp for the executive.(81) He is the state's
fearless watchdog of official integrity and occasionally draws
bitter comment from some MPs. The Ombudsman earlier this year
sought a Supreme Court ruling on the question of the long
adjournment. Parliament had sat on only 17 days since mid-July
1998, which, the Commission argued was far less than required by
the Constitution. The issue was resolved in late June when six of
the seven Supreme Court judges, with Chief Justice Sir Arnold Amet
dissenting, ruled that conformity with the Constitution did indeed
require that the National Parliament sit for nine weeks in each
parliamentary year.(82) By then, however, the momentum towards a
vote of no-confidence was irresistible.

The Government was starting to implode. The
Speaker, John Pundari from Enga Province, announced in May that he
would form a new party and seek power. The Prime Minister brushed
the issue aside, saying Pundari was a 'small boy'. This insult led
seven of Skate's vice-ministers to issue a statement defending the
Speaker.(83) However for 10 months there had been hints that
Morauta of PDM was positioning himself to move against the PM. Bill
Skate's insecurity was manifest on 3 June when he sacked Sir
Mekere, then Fisheries Minister, allegedly because he had failed to
create a rescue package for the economy within a fortnight. Morauta
defended himself but in response to his critics Skate claimed a
virtue in being 'unpredictable', which became his nickname.(84)
Morauta's replacement was the irrepressible Chris Haiveta, whose
return was an anathema to many other PDM ministers.

On 14 June Mr Pundari launched his Advance PNG
Pati (APP), claiming twenty-two MPs as firm members. Among those
present at the launch included the former PPP leader and Deputy PM,
Michael Nali, and well wishers including political associates of
Sir Julius Chan, Paias Wingti and Sir Michael Somare. APP was seen
by some observers as having Chan's full backing. Mr Pundari
succinctly raised several major national issues, which clearly
pre-dated this particular parliamentary crisis:

constant political interference in administrative processes in
government institutions ... including unwarranted, blatant and
illegal interventions into police investigations relating to cases
implicating certain leaders ...

total lack of appreciation for ethics, which form the basis and
foundation of good governance, evidenced by constant manipulation
of political parties and unceremonious sackings of ministers,
departmental heads and chief executives of statutory and corporate
organisations

total disregard of democratic conventions shown by certain
Government leaders in the conduct of the nation's affairs, and

He also raised lack of confidence in government,
lack of fiscal discipline, and a serious breakdown of law and
order. Despite his professed religiosity and unassertive manner, Mr
Pundari had given a hard-hitting summary of the country's crisis of
governance. As part of his campaign, Pundari highlighted the
political dimension of the country's problems, a focus very
different from the public administration emphasis of international
aid donors.

Late in June Sir Mekere Morauta became the new
leader of PDM and criticised the decision-making process in the
Skate ministry, saying the hiring of the economic adviser was
ill-conceived, the Prime Minister was 'dictatorial' and public
servants feared giving independent advice for fear of being bundled
out. Cabinet meetings, he said, were not held on a schedule, with
agendas unstructured or made up on the spot. Ministers were
hand-picked to attend and make particular decisions, he said.(86)
In all, twelve Ministers left Cabinet in June, along with five
Vice-ministers. Of the largest party, PDM, only a small faction
remained in Government, led by the Deputy PM and Finance Minister,
Iairo Lasaro. The PM's desperation was shown in late June when,
attempting to shore up his numbers, he purported to split his own
PNG First party into three. He then offered the leadership of one
new 'party' to Francis Koimanrea and a knighthood to Koimanrea's
brother, Alois Koki, MP, the leader of a major cargo cult and
political movement at Pomio. They both refused.(87)

Votes of no-confidence are regular features of
the PNG parliamentary cycle and create months of frenzy and policy
paralysis in Waigani, the Port Moresby suburb where government is
located. In all PNG parliaments elected since 1977, there have been
motions of no-confidence which have either failed or been withdrawn
when the Prime Minister has used the control of the public purse to
attract a majority. Nonetheless there has been a change of prime
minister and governing coalition mid-way through each five year
term. Some observers see the game of musical coalitions as a factor
stabilising the country's constitutional democracy, because 'the
system has ensured a regular change in prime ministers and
ministers, so that the key actors are willing to wait for their
turn rather than upset the applecart'.(88) While this may be true
in the longer term, each potential vote of no-confidence is
extraordinarily destabilising, a point recently made by Sir Rabbie
Namaliu,(89) who while Prime Minister experienced eight such
episodes between 1988 and 1991.

By late June 1999, Mr Skate had lost his
majority. In response he sought to attract new recruits into his
Coalition. This is always possible, because of the way electoral
politics work in PNG. Candidates mobilise electoral support from
local clans rather than utilising the party membership. So MPs owe
little to parties and their loyalties are tenuous. Party discipline
is weak. In practice, MPs rely for their re-election on delivering
benefits to their own core voters, so blatant opportunism is seen
as both rational and necessary for survival. Accordingly, alliances
with party leaders, often based merely on the hope of rewards, are
notoriously fluid. Party-swappers are called 'yo-yo' politicians.
Similarly, bonds between coalition parties are frail. Some PNG
observers and politicians believe a strong party system would
rectify this destabilising trait.

The 1975 Constitution provides for a law, which
never eventuated, aimed at ensuring the integrity of political
parties. Since 1982 Sir Anthony Siaguru, now head of the PNG
chapter of Transparency International, has advocated legislation to
ban party-swapping at the expense of facing an immediate
by-election. Parties were strongest in the 1982 election campaign,
but even with government funding, strong parties cannot be
legislated into existence. Currently MPs in the Constitutional
Development Commission (CDC) are drafting new legislation to
regulate parties, provide state funding, and ensure MPs' continuity
of membership.(90) The current Prime Minister recently told a
Commonwealth Parliamentary Association regional meeting that 'It is
no secret that PNG has problems with the way the political system
operates. They have been building up for years. They need fixing
now'. He also suggested there are problems with the
first-past-the-post voting method not reflecting the majority will
of voters.(91) In order to work, should the necessary two thirds
absolute majority of MPs ever legislate such self-denying
proposals, the proposed integrity legislation would require a
substantial mind-shift in the electorate, because the present
system of extravagant electioneering gifts is entrenched under the
guise of Melanesian culture.(92) Cynical MPs might skirt the
legislation by calling themselves Independents. In August the CDC
began discussing the possibility of changing or even scrapping the
provisions for no-confidence motions, a complex set of issues.

In 1991 the Parliament recognised the negative
impacts on policy-making and implementation caused by this system
and lengthened the period before and between votes of
no-confidence. Yet the problem remains, because there is no
effective electoral sanction against MPs' disloyalty within the
normal five year parliamentary term. In the last year of the
1987-92 House, when a no-confidence vote would have precipitated an
immediate election, the Parliament was an effective legislative
body. This did not occur in 1996-97, however. In the run up to an
election or just before votes of no-confidence, prime ministerial
anxiety can result in a search for 'a quick fix', which for Chan
was the Sandline adventure. For other PMs, it has been money. In
mid-1999 Bill Skate was still able to use the well-known rules of
the game but his Government was broke.

The periods of coalition-making in PNG are often
times of over-hasty decision-making. While trying to retain power
Bill Skate decided to grant diplomatic recognition to Taiwan,
hoping to gain soft loans and grants, with immediate access to
US$500 million. This move was designed by Dr Hamidian-Rad and the
Foreign Minister, Roy Yaki. The story broke on 2 July, the day
these two went to Taipei with Mr Skate and several senior
officials. The negotiations were apparently leaked by an Australian
source to a journalist who wrote that the information came from
'intelligence sources',(93) which some observers think were
Chinese. Reportedly China hoped that Australia could persuade PNG
to halt the recognition process,(94) which-if true-overestimates
Australia's influence in Waigani. A recognition agreement was
signed on 4 July but has not been released. Within a week, Taiwan
had opened an 'embassy' in Port Moresby. Australian diplomatic
niceties and more outspoken parliamentary comments from Canberra,
provoked an initial nationalist response from Foreign Minister Yaki
and PNG government supporters, as well as the Opposition Leader
Narokobi. Australian interventions often seem counter-productive.
Something similar had occurred after the Australian Government and
the entire Parliament had expressed concern at the Sandline
contract in 1997, when Roy Yaki was Opposition Leader.(95) When
challenged, patriotism can be a convenient first refuge but over
decades Yaki's nationalism has been consistent.

Eventually, PNG's own political processes
started working. It was reported that the Taiwan issue had not been
raised with the PNG Department of Foreign Affairs and Trade for
advice. Then the move was criticised by four former Foreign
ministers, including Chan and Somare, and two former secretaries
for Foreign Affairs. After a week the discussion in the PNG press
and PNG student web pages had moved from supporting the deal to
calling it a sell out of PNG sovereignty. It emerged that the aid
proposed was US$2.35 billion, about half PNG's Gross Domestic
Product. However it was revealed that this figure was what the
Skate Government had sought, rather than what Taipei had committed,
and the Deputy PM, Mr Lasaro, told the press that Cabinet had not
endorsed the recognition proposal.(96) Perhaps all the hoped-for
funds might not have come. Further, the decision was made
unconstitutionally and the agreement with Taiwan required
parliamentary endorsement to become valid.

PNG has long had close relations with both
Beijing and Taipei,(97) and for some years PNG political figures
have been agog with the idea that Taiwan had US$28 billion to
spare. PNG watchers say Sir Julius Chan once came close to
recognising Taiwan but reconsidered. Diplomatic recognition may
seem a symbolic act but can have practical consequences. Mid-1999
was a period of serious tension between Taiwan and Beijing, which
sees Taiwan as a breakaway province-which led some PNG observers to
say it was like Bougainville. Taiwan denied there was a 'money
diplomacy' trade of aid for recognition. Yet the funds under
discussion would be tempting to an accountant or politician wanting
ready cash, despite the PNG cabinet submission having admitted the
step would 'generate significant resentment from China and several
other countries'. The submission went on to say 'However, PNG as a
sovereign nation should determine its own destiny and its foreign
policy.(98) ' Implicitly countering the economic incentive,
Australia's Foreign Minister Alexander Downer publicly raised PNG's
possible loss of the China market.(99) Taiwan buys a few PNG
exports, mostly timber, whereas China, which buys around ten times
more (US$110 million per annum), is PNG's fourth largest trading
partner. Both have given small amounts of agricultural training
aid, yet China also donated a national showpiece, the Sir John
Guise Stadium in the Waigani town centre. Although he went to
Taiwan in 1998, Bill Skate had visited Beijing earlier in the year,
so China had reason to think PNG was a friendly country, PNG having
accepted Chinese development aid and discussed possible defence
assistance arrangements.(100)

Mr Downer and Australia's High Commissioner
David Irvine also mentioned regional destabilisation. The issue of
regional instability was not explored in the media. PNG is the
largest member of the South Pacific Forum, which after each year's
heads of government meetings has structured dialogue sessions with
major aid donors. The fact of Taiwan's recognition by three island
states necessitates a separate small meeting for Taiwan, while the
majority of Forum members meets China together with other major
donors. China is far more significant than Taiwan in the APEC
Forum, where PNG represents the other Pacific Island countries.
Taiwan has limited diplomatic influence in South East Asia which
for PNG is an area of great economic, political and strategic
importance. PNG is a Special Observer at ASEAN meetings, and has
long desired full membership, partly to help balance the influence
of Indonesia. Taiwan is not a dialogue partner in the important
regional discussions held with major powers after ASEAN ministerial
meetings.

China would have been unlikely to let PNG's
recognition of Taiwan pass without retaliation, if only to deter
others. China would have had an immediate chance to punish PNG
through its role on the board of the Asian Development Bank.
Antagonising China could carry strategic ramifications because of
PNG's sometimes problematic relationship with Indonesia. More than
three decades of West Papuan secessionist movement in the province
of Irian Jaya has meant that there are thousands of Irianese
refugees in PNG, which still experiences occasional Indonesian
military incursions over the jungle border. Relations have been
relatively smooth since the mid-1980s. However in the last year,
with Indonesia changing its central government regime and the
people of East Timor anticipating their act of self-determination,
there has been a nationalist upsurge in Irian Jaya, followed by
security crackdowns. If this conflict escalates and spills over
into PNG, the Waigani government could want diplomatic support and
international observers from ASEAN. It will need as many allies as
possible. Peacekeeping assistance from the United Nations Security
Council would similarly require the support of China, which as one
of five permanent members of the Security Council could veto such
action. China has used this power when it blocked the extension of
the UN peacekeeping operation in Macedonia-a country which had
recognised Taiwan in return for considerable aid.(101) Several
Chinese government spokespeople in early July mentioned possible
'serious consequences' for PNG if it went ahead with diplomatic
recognition of Taiwan,(102) which-given the Macedonia precedent-is
a formal warning which cannot be taken lightly. It would appear,
however, that-having obtained the promise of massive funds-Mr Skate
had other things on his mind.

Mr Skate was in Taipei on 4 July when the
Australian Defence Minister, John Moore, was asked in a TV
interview about the PNG situation; his reply was prominently
reported in Port Moresby. He mentioned 'some instability in
Government' and the possibility of a motion of no-confidence: 'If
it is carried, and that leads to a new government, then that might
well lead to a better outcome in PNG'.(103) There would almost
certainly be increased stability once the dust had settled, no
matter who emerged as Prime Minister. But Australia looms large in
the political hothouse of Port Moresby and Bill Skate's supporters
read the remark as hostile meddling. On 7 July Mr Skate resigned as
Prime Minister, taking several swipes at Australia as he went,
possibly in an effort to attract nationalist support and smear
Morauta.(104)

It was the MPs' political 'camps' and
'horse-trading' into coalitions which attracted the Australian
media in late June. Twenty members of Morauta's People's Democratic
Movement travelled together to stay in Cairns, where PNG elite
members often go for peace and quiet. Then in early July the
Morauta team in close liaison with Sir Michael Somare moved to
Madang. Advance PNG Pati joined them, led by Mr Pundari, who had
resigned as Speaker. Some 54 men and one woman, Lady (Carol) Kidu
(the respected Member for Moresby Southeast) then spent seven days
and nights on a tourist vessel owned by a former MP, Peter Barter,
discussing policy and wrangling over their candidate for PM. Only
six of the 16 official Opposition members were in Madang, and the
Opposition Leader Mr Narokobi was a minor player throughout.

Mr Pundari was sleeping at a Madang motel of
another former MP, Peter Yama, and, although Pundari proposed that
Morauta become PM, he retained leadership ambitions. He stayed on
in Madang with his 22 MPs when Morauta's team returned to Port
Moresby on Sunday 11 July. The previous few days had been dominated
by news that Mr Skate's Principal Political Adviser, Utula Samana,
had been intercepted at Madang Airport, allegedly holding
considerable cash and cheques, which he denied. The MPs and the PNG
media assumed the funds were for the crude inducements which
feature in PNG political horse-trading. Mr Samana may not have been
involved but subsequently such suspicions proved well-founded:
Skate ministers report six million Kina of state funds had been
paid in Mr Skate's attempt to retain power.(105) In contrast,
Morauta supporters back in Port Moresby gladly accepted donations
for food for their team from friends and the public. On Sunday Mr
Pundari was joined in Madang by Mr Skate's group, which flew in by
air charter from Rabaul. Skate and his allies now had a majority
and on 12 July they too returned together to Port Moresby, where
Skate finally named Pundari as his group's candidate for PM.
Nevertheless, a Morauta supporter, Peter Waieng, warned his former
allies that Bill Skate's resignation changed nothing if the whole
system of governance was not changed. Those who had split from Mr
Skate had 'a desire to change a system that was not working in the
best interest of the country'. He added: 'When an individual steps
aside, not out of the system, but leaves his system in place he can
control it from anywhere he is. Do we want to become puppets? That
is my question to my fellow members who left with me and are now
going back?'(106)

Just as the English have been said to be only
truly free on voting day, PNG parliamentarians may only have real
power when choosing a Prime Minister.

As we now know, on Tuesday 13 July some 57 MPs
voted for Iairo Lasaro, Mr Skate's nominee as Speaker, compared
with 47 votes for Bernard Narokobi, Sir Mekere's candidate. This
seemed to foretell the vote for Prime Minister the next day, but
the politicking continued through the night, with Skate's team
well-guarded at the PM's residence, Mirigini House. The Morauta
team in desperation offered the leadership to Chris Haiveta,
thereby prompting Skate to do the same. This prospect apparently so
outraged Pundari that at dawn he changed camps for the third time.
Much of this manoeuvring was last minute ad hocery, and it was said
one offer was never conveyed because of flat batteries in the
recipients 'mobile' phone. Then, as the MPs were driven to the
Parliament House next door, Mr Pundari deflected his bus load to
the Opposition's entrance. When Parliament reconvened at 10 a.m.,
John Pundari declined Chris Haiveta's nomination for the prime
ministership and himself nominated Sir Mekere Morauta. The other
candidate, Francis Koimanrea, formerly with Skate, was irrelevant.
Recognising defeat, Skate's team saved some face by crossing the
floor, which gave 99 votes to Sir Mekere and five to
Koimanrea.(107) In an anti-climax, Iairo Lasaro resigned the
speakership, and was replaced unopposed by Bernard Narokobi, who
pledged to work to strengthen parliament.

The Constitution had been upheld. Papua New
Guinea had shown for the fifth time that it can change government
peacefully. Yet there was apprehension. Fearing upheaval, a number
of senior officials had left Port Moresby and some elite members
were warned to quit the country for the duration. Trade unionists
were advised to stay home, as were non-essential Australian High
Commission staff. On the morning of 13 July, just before Parliament
reconvened, police prevented a group of people from storming
Mirigini House. Police also seized a number of licensed rifles and
automatic pistols at the MPs entrance to Parliament House.(108) In
the end, this phase of the transition involved only a reshuffle of
the parliamentary elite and there were no public disturbances.
PNG's democracy had survived another major crisis.

In a resonating acceptance speech, Sir Mekere
Morauta, told the Members they had 'made a date with destiny':

We have chosen order over chaos. We have chosen
hope over despair. We have chosen pride in our young country over
mindless pursuit of narrow interests. We have chosen to give our
children the chance of a decent life in their own country, in place
of fearful descent into poverty, poor health and disorder.(109)

Morauta then excoriated the economic management
of the previous Government and its weakening of the central
institutions of government and of talented Papua New Guineans
serving the public. Sir Mekere said his Government's first
objective was 'to restore integrity to our great institutions of
state, the very institutions that are necessary for our personal
security and our prosperity'. He pledged to respect the state
institutions, 'to seek advice from them and listen to their
cautions'. The new government, he said, would stabilise the Kina,
restore stability to the national budget and remove obstacles to
investment and growth. It acknowledged the Skate Government's
achievements in the Bougainville peace process and committed itself
to pursuing 'a progressive political settlement in Bougainville
without threat or use of force and based on the rule of
law'.(110)

Members of the new Coalition were determined to
confine the 'spoils' of victory to loyalists who had who committed
themselves early, thereby excluding the talented Sir Rabbie
Namaliu, who changed sides on the last day. On 14 July Sir Mekere
established a caretaker Ministry of eight, with John Pundari of
Advance PNG Pati his Deputy PM. On 26 July Morauta created a
cabinet of 24, with four positions in reserve available, given the
constitutional limit of 28. Obviously seeking to control key areas,
Morauta has taken a huge workload. As well as the National Security
Council and the National Executive Council (cabinet), normally held
by Prime Ministers, he holds Finance, Treasury, Health,
Bougainville Affairs, Information and Communications. No doubt he
will shed some of these once they are under control and he has
replacements of quality. Accordingly, late in August, Sir Michael
Somare took charge of the Bougainville Affairs portfolio.

The Deputy PM Pundari has the Home Affairs,
Women, Youth and Churches portfolio, traditionally a junior
ministry but one which is being upgraded. Kilroy Genia, Minister
for Justice, is the only other appointee from APP. Mr Pundari's
party may have been punished for its leader's vacillations, which
upset one party official who said the APP deserved nine
ministers.(111) Nor did the People's Progress Party fare well,
although with only four MPs it had little bargaining power. Sir
Michael Somare became Foreign Minister, and Ted Diro(112) (Peoples
Action Party, PAP) was allocated Agriculture and Livestock. Sir
John Kaputin has gained the important Mining portfolio and seems
likely to continue as the 'bipartisan' Special Negotiator on
Bougainville, a role established by the Bougainvillean parties
meeting in New Zealand.

This Cabinet involved the recycling of many
recent Ministers into new portfolios. In all, some sixteen former
Skate Ministers, all well known to Sir Mekere, gained ministries.
They included Peter Waieng, the former Defence Minister, who is
Minister Assisting the Prime Minister. Overall, PDM has 17
Ministers (including five ex-PNG First members); the National
Alliance has three; the APP two and PPP and PAP one each.(113) The
absence of Lady Kidu from the Cabinet was criticised by Dame
Josephine Abaijah, the only other woman MP, and the allocation of
portfolios drew adverse comment from several disappointed
parties.(114)

The new Government quickly got to work,
preparing a mini-budget, with the help of a tax adviser John Ralph
(the former head of CRA) and economists Professor Ross Garnaut and
Andrew Elek, both old hands in the PNG Finance Department.
Introduced on 10 August, this 'Last Chance' mini-budget to 'help
stop the rot' is designed to reduce the deficit, cutting
expenditure by K140 million (especially 'development'
spending) in particular and raising taxes by K72.4 million
(especially indirect taxes). A newly-introduced 15 per cent
interest withholding tax on mining and petroleum companies would be
axed. A deficit of 1.7 per cent of GDP was possible, which would be
raised by external funds. Sir Mekere said this involved a
turnaround from the K218 million shortfall till July, with an
expected surplus of K60 million in the second half of
1999.(115) The privatisation of some state enterprises and
utilities has been mentioned and has been discussed in PNG since
1992 but few if any of these would be attractive to investors after
being run down this decade.

The government made several other important
decisions in the first weeks, including:

removing Mr Aigilo and appointing John Wakon as Police
Commissioner

reaffirming the validity of PNG's recognition of China, saying
the Taiwan arrangement had not been properly implemented

appointing the experienced Deputy Governor, Wilson Kamet, as
Governor of the Bank of Papua New Guinea

removing the Finance Secretary, Brown Bai

preventing Dr Hamidian-Rad from leaving the country and later
charging him with fraud and tax evasion

bringing to retrial five soldiers previously acquitted of a
late 1997 mutiny against General Nuia, and

suspending Major-General Singirok as Commander on 6 August 1999
and appointing as Acting Commander Colonel Karl Malpo (whom
Singirok had sacked). The sedition charges against Singirok were
reactivated and the Ombudsman recommended to the Crown Prosecutor
that Singirok face a Leadership tribunal over the J. and S.
Franklin money.

Removing Skate appointees may have been
necessary, but 'may ironically be seen as further entrenching the
politicisation of public office.'(116) A problem of continuing
concern will be the politicisation of the security forces,
especially the military.

The Parliament met for several weeks in July and
August, with much to discuss. Soon the new government faced strike
action by health workers over unpaid salaries, all the national
aircraft engineers in the state-owned Air Niugini were sacked after
industrial action, and a power strike was averted. The western part
of the Southern Highlands was described as a 'war zone', and has
been for months. Reports surfaced that PNGDF troops on Bougainville
were not being fed. There was discussion both of closing the Ok
Tedi copper mine and of extending its life. PNG was travelling
along, bumpily, as normal.

PNG's problems this decade are rooted deep in
the society and the country's recent history, but their current
scale is unprecedented, as Sir John Kaputin said while publicly
joining Sir Mekere. He added:

As we struggle to restore national confidence
and international acceptance, we should keep in mind that we are
being constantly judged for political transparency, accountability
and good governance.(117)

Diagnoses of poor governance differ in emphasis,
like the concept itself. Hence there is a need to examine what
people mean by the term and what causes difficulties in each case,
and never expect to find one single cause. Having said that, the
political instability which contributes to poor governance in PNG
appears to come from regional, ethnic and kinship
fragmentation.

Local divisions contribute to the apparently
dysfunctional ways in which the political system has evolved in the
last three decades. Intense localism combines with poor government
performance to strengthen the widespread belief that MPs should
themselves handle various government funds in order to benefit
their constituents. Such funds now total about half the grants a
province would have obtained previously. They rarely go to the
provincial government or are rarely spent across the electorate as
a whole, but usually only benefit an MP's supporters (who may be a
small minority of voters). And, as Sir Mekere Morauta has said, MPs
are not project managers.(118)

The 1995 provincial 'reform' arrangements
transferred power from what had been locally elected provincial
assemblies and cabinets to the MPs and also put electorate funds
effectively under the control of MPs.(119) Money politics starts
with general elections, which are an expensive part of PNG's
political culture. At the local level, elections are battles for
group pride and for access to state resources, and in the Highlands
elections often follow the same divisions as tribal warfare and
have become increasingly violent.(120) Once elected, MPs want to
recover their investment. Those who benefit from the present system
would be losers if all slush funds were to cease. Changing such
entrenched modes of politics to improve governance will require
more than good leadership and luck. Governments will first will
have to deliver basic services to the citizenry and offer realistic
hope of advancement.

There are several major administrative and
historical factors which will affect moves to regenerate government
in PNG. They include:

the complex system of power and revenue sharing between the
national government and the provinces

the limited tax base and low revenue levels

insufficient trained and experienced staff, particularly in
provinces, and

the debilitating side effects of the decade long Bougainville
crisis.

Underlying such factors is the country's human
geography, the rugged terrain and the dispersed pattern of human
settlement. PNG remains an underdeveloped country, despite several
enclaves of intensive resource development which employ few people.
Eighty per cent of the people live in villages and small hamlets
combining subsistence farming with cash cropping. The population is
young and growing, with more than two million people under 18 years
of age. Their educational levels and economic skills, like the
available opportunities, cannot satisfy people's expectations of a
better life. Such factors add to pressures which can overwhelm
governments. Many of PNG's challenges-especially at the grass
roots-are not amenable to short-term government action.

Governance issues of various types impinge on
all people of PNG, not least the 10 000 or so Australian citizens
living there. Governance affects the daily lives of ordinary people
and in towns and villages, as well as public servants and business
people. The people of PNG know that recent governments have failed
them. They are barraged with both rumours and reports of corruption
and scandal in high places, which, as the Catholic bishops pointed
out, provides a ready rationale for property crime and
interpersonal violence. In such a context, even dedicated people
can lose the sense of public duty. Public cynicism can promote a
breakdown of the civility essential in a functioning society. Many
public servants appear to be demoralised. Sometimes villagers
express their frustration against the state and anger against each
other. Parents or friends of children who feel they have been
denied schooling or that the school has failed them, may burn the
school. People can lose respect for each other. Unsafe sexual
practices have been documented, and disease is endemic. As always,
just as in the Balkan wars, in PNG's tribal fighting pack-rape is
an attempt to assert male solidarity and superiority. The
implications for the spread of HIV means rape is also now a health
issue.(121) There have been two recent pack rapes of schoolgirls,
in one case by their own classmates.(122) Bougainville has suffered
a decade of social trauma and rape in civil war. This paper has not
closely examined PNG's social problems, or crime and the spread of
firearms,(123) yet there are clear signs that parts of mainland PNG
society are entering a profound crisis, just when Bougainvilleans
start their internal reconciliation processes.

After the change of government Australia
immediately reactivated its relationship with PNG, starting with a
visit by Treasurer Peter Costello, who offered to advance a
A$31 million quarterly payment to assist PNG's liquidity
crisis and started preliminary discussions with the World Bank and
IMF about reactivating the Structural Adjustment funding.
Australian Foreign Minister, Alexander Downer, then personally
conveyed Prime Minister Howard's congratulations and stressed
Australia's commitment to the bilateral relationship. Mr Downer
recently said he was now 'a great deal more relaxed about' the
bilateral relationship.(124) Acknowledging recent tensions, he
argues the new PNG Government provides an opportunity for a fresh
start by the two countries working together. He stresses that
Australia is not a colonial power-as shown by the Sandline episode.
Australia ignored or downgraded this 'vastly important'
relationship at a high price, Mr Downer said.(125) However good
inter-governmental relations are only part of the interaction
between the two countries, which carry a lot of historical baggage
and which may not be able fulfil each others' varied
expectations.

Australia has complex relationships with
PNG,(126) ranging from privately and officially-sponsored schooling
of PNG children in Australia and inter-marriage and family
migration; business investment (A$2.6 billion in 1996, the majority
in mining); bilateral trade (in 1995 about A$2.2 billion per annum;
at times in PNG's favour because of its gold exports); exports of
services (A$292 million in 1995-96) and imports of services (A$125
million in 1995-96);(127) and to defence co-operation (A$10.3
million this year).(128)

AusAID's well-publicised development assistance
has been steady at around A$300 million per annum in monetary terms
for many years but declined in real terms. Australia's jointly
programmed aid to specific sectors especially health, education and
infrastructure has increased in size, spread and significance just
as the PNG state's own capacities have declined. Over this decade
PNG governments have only reluctantly agreed to jointly-programmed
activities replacing by June 2000 all untied budget support
(currently A$35.5 million). It is often argued in PNG that tied aid
denies PNG's independent capacity to allocate its own priorities.
The donor can always say 'No', but recipients can resent their lack
of choice. PM Chan often said that 'beggars can't be choosers'. The
aid relationship is unlikely to be free of tension, however.
Another Development Cooperation treaty is currently under
renegotiation and the Australian Government is pledged to maintain
funding at current monetary levels for five years. The Australian
Government assesses that PNG's level of poverty will take a long
time to overcome and notes the country's susceptibility to natural
disasters.(129) Additional emergency relief, such as that provided
after the 1998 tsunami, is immensely welcome in PNG. In addition,
Australia's important peace monitoring contribution and
reconstruction work on Bougainville continues.

The Australian High Commissioner, David Irvine,
reviewed aid issues at the end of his three year posting in Port
Moresby. Australia had spent over A$1 billion (K2.7 billion) in
that time, and last year its development spending in PNG was double
that of the PNG Government's Budget. He listed a range of AusAID
achievements, and noting the lesson of recent overseas studies,
argued the need to make the best use of a country's citizens,
stressing the crucial importance of the education and advancement
of girls and women. He then suggested that PNG should not rely on
aid alone to solve its developmental needs:

The key to sustainable development is prudent
and constructive overall management of the economy. When an economy
is well managed, aid can assist substantially. But when poorly
managed, then in the long run no amount of aid will make much of a
difference.(130)

As noted, the bulk of Australia's aid is now
program assistance in five sectors: Infrastructure, Renewable
Resources, Education, Health and Governance. Many of PNG's
identifiable problems however, are probably not rectifiable by
externally-funded aid programs, especially not large scale
projects. The system of aid contractors, with short-term goals
often does not provide much continuity for the recipient bodies or
PNG counterpart workers. If foreigners are to be involved in
development, and PNG people generally seem to want them, the
desired human capacity-building may occur better with long
attachments of Australian staff in government agencies. Similarly,
NGO teams, including well-supported volunteers, can work well in
government or the community sector on smaller projects. Provided
expectations are not too high, individual projects can lead to
identifiable improvements. Performance varies from sector to
sector, and province to province.

All aid programs must be dovetailed into PNG's
own effort without undermining that country's government. This can
involve profound ambiguities. As Australian aid has become more
engaged with domestic programs in PNG some PNG ministers and
officials have become increasingly wary of Australia. Depending on
matters as diverse as national pride and individual counterpart's
personalities and experiences with Australians, Papua New Guineans
can perceive and resent meddling or domination by outsiders. Some
believe their country can stand on its own, or would prefer that
was the case, as seemed to happen with the emergency relief in the
1997-98 drought. PNG politicians naturally enough would like to
control projects and certainly want to take the credit for them.
They tend to prefer visible edifices and employment creation rather
than community or staff-development projects. Some resent any form
of missionary activity, be it religious or secular. Some do not
like their country people demanding foreign projects, which can
tend to show up the weakness in their own government's performance.
This is to be expected as a natural assertion of the country's
independence but it makes the bilateral aid relationship
extraordinarily difficult.

Australian aid contractors and NGOs now employ
Papua New Guinean counterparts in their project teams, and most
Australians work well with their PNG colleagues. The intention is
that these programs be sustainable once the foreign inputs end.
However, given the short term of many projects and changing
priorities among recipient governments, continuity may be beyond
the control of donors. Contradictions are always inherent in the
best-intentioned aid programs, with the paternalistic impulse to
quietly take over being a strong temptation. Foreign-led projects
sometimes unintentionally undermine the confidence of PNG staff and
the PNG public in their own capacities.

The current Australian aid budget gives top
listing to the aim to 'improve governance by strengthening
institutions both in government and civil society including
community based organisations'.(131) AusAID's literature describes
as 'governance' activities which were previously called
institution-building or capacity-building in public administration.
However the Acting Director General interestingly gives a broader
'operational framework for governance', which includes 'Promoting
effective and equitable legal systems and strengthening the rule of
law', and 'Strengthening civil representation and participation to
enable better scrutiny of policies and practices'.(132)

In the overtly political spheres of governance,
which are so often identified in PNG debate, there may be a little
scope for Australian help. These are particularly sensitive fields.
Some highly relevant and recent small projects can be mentioned
which have started or are being designed after requests from PNG
agencies to help strengthen their institutions for accountability.
One example is the four day workshop on parliamentary committees
held last April at the request of Speaker Pundari.(133) This was
funded by the Commonwealth Parliamentary Association and conducted
by the Clerk Assistant (Committees) of the Australian Parliament,
Cleaver Elliott. The officers of the PNG National Parliament are
likely to welcome a revival of previous assistance programs from
Australia. The PNG Ombudsman Commission also receives assistance
from AusAID and other agencies such as the Australian Federal
Police. In consultation with the Australian Electoral Commission
and the PNG Electoral Commission, AusAID is exploring whether
Australia can assist central electoral administration in PNG. These
projects are welcomed by the recipient agencies, if not the
country's financial managers or all senior people in the PNG state.
Hence the promotion of accountability in government requires great
caution. It is possible to imagine other
institutional-strengthening projects which might help promote good
governance but which might not be among the PNG government's
highest priorities. Success with aid relationships requires that
the recipient country feels it 'owns' the initiatives.

In mid-1999, as on previous occasions, Papua New
Guineans are proud at having resolved their immediate political
crisis. While the National Parliament demonstrated the Melanesian
flair for reconciliation after angry confrontation, this year's
events taken as a whole reflect a prolonged and complex set of
problems. Papua New Guineans themselves express concern about
systemic weakness in the country's governance. They also take
responsibility. While wanting foreign aid they give no suggestion
that they think outsiders can solve their political problems.

This paper has described PNG's recent political
crises in the hope that events in that country-which will always be
politically volatile-will seem less unpredictable for outsiders.
Major events in PNG soon ripple across the Torres Straits. While
focussed on the politics of the last few years, the paper has
highlighted perennial difficulties in the parliament, the military,
the public service and the provinces, and in the monetisation of
politics. The rising level of population poses fundamental
challenges for the state in Papua New Guinea. Growing public order
problems are likely to prompt increased movement of the elite,
which may benefit Australia but weaken PNG.

The new Government led by Sir Mekere Morauta
faces issues similar to those of its predecessor and the public
will no doubt retain their desire for political short-cuts and easy
benefits from politicians. Under the Constitution as it now stands,
the Morauta Government has only 18 months guaranteed rule to
stabilise the economy and implement the necessary tough reforms.
Achieving good governance in Papua New Guinea in the long run
necessitates both a major change in the way the people of that
country conduct their public affairs and a reorientation of their
political and bureaucratic cultures. That sort of shift is not made
quickly; the country's governance problems are unlikely to be
readily rectified by any national leadership team or foreign
government. The people of PNG will have to work out their deepest
problems together, while receiving outside financial and technical
help, hopefully on terms they can accept.

For Australian readers, this analysis points to
the limitations built into the entire bilateral relationship and to
the risk of expecting too much too soon. It particularly
illustrates the complexities being tackled under Australian
development assistance programs, especially those grouped under the
heading of governance. Papua New Guineans appear to use this
terminology in discussing their political problems, whereas aid
donors have tended to see governance matters as technical issues of
administrative capacity. Clearly these interpretations are not
unrelated, yet this divergent use of 'governance' has the potential
to create confusion, if not resentment, on both sides. No matter
how necessary, aid programs which are too assertive in the
political spheres of governance are likely to be seen as
intrusive.

Although neighbours, the contrast been the two
countries is immense. One is quite rich, the other relatively poor,
the difference heightened by their geographic closeness and shared
news media. The two countries have been closely linked in times of
peace and times of war. They also share their region with
Indonesia, a giant country with its own governance problems, and so
have reason to cooperate in many spheres. Yet there remains the
niggling issue which Prime Minister Bob Hawke once called 'the
colonial overhang', and, not surprisingly, people in the two
countries have occasional irritations with each other. They are,
after all, neighbours for the long haul.

After discussing PNG's high population growth, slow economic
growth rates and low levels of waged employment, former Foreign
Affairs Minister Bill Hayden wrote that PNG is 'a social and
political time bomb on our doorstep and the cause rests solely with
Port Moresby'. Hayden: An Autobiography, Angus and
Robertson, Sydney, 1996, p. 433. A long time observer of PNG, Peter
Ryan, in 1984 said: 'PNG hurtles downhill into an ungovernable
morass, for which the Australian taxpayer parts with some A$300
million a year. But it is 'unhelpful' and almost jolly bad form to
mention it'. Melbourne Herald quoted in Papua New
Guinea Post-Courier(Post-Courier), 18 December 1984,
p. 3. These concerns are echoed by a former Department of Foreign
Affairs and Trade economist, Peter Urban, in 'The Balkans on our
doorstep', Canberra Times, 10 May 1999, p. 10. See also
B. A. Santamaria in The Australian, 'A return to
barbarism' 9 August 1988, 'Mayhem and massacre-the growing fear in
PNG' 16 August 1988 and 'Nationhood squandered', 7 March 1989.
Santamaria's arguments were countered by Rowan Callick 'Fuzzy-wuzzy
fear clouds relations with northern neighbours', Australian
Financial Review, 19 August 1988 and Jim Griffin, 'A barbaric
report', The Times of Papua New Guinea, 25-31 August 1988.

Bill Standish, 'Papua New Guinea: The search for security in a
weak state', in Alan Thompson, ed., Papua New Guinea: Issues
for Australian Security Planners, Australian Defence Force
Academy, Canberra, 1994, pp. 51-97.

This issue will not be explored here. See the submissions and
hearings of the inquiry of the Joint Standing Committee on Foreign
Affairs, Defence and Trade, Foreign Affairs Sub-Committee into
'Bougainville: The Peace Process and Beyond'.

For example, Professor John Nonggorr, 'A lack of good
governance', The National (Port Moresby), 14 July 1999.

At the same stage in July 1982, while acting as a power broker,
the just defeated Deputy PM Iambakey Okuk, said 'The voters have no
rights at the moment. Once elected, the MP must decide what is best
for his career', and added 'I can afford it. I can buy most of
them.' Bill Standish, Melanesian Neighbours: The Politics of
Papua New Guinea, the Solomon Islands and the Republic of
Vanuatu, Canberra, Parliamentary Library, p. 62, quoting
The Times of PNG, 15 July 1982.

SBS TV, Dateline, 30 March 1996; Prof. John Nonggorr,
'Hopes high for a good govt', The National, 21 July 1999.

O'Callaghan, Enemies Within, op. cit., p. 255.

Geoffrey Barker, 'PNG foes gang up to oppose Somare',
Australian Financial Review, 22 July 1997, p. 8; John
Apami 'Skate is PM. Six member Cabinet named; Pledge to reopen
Sandline probe', The National, 23 July 1997.

O'Callaghan, Enemies Within, op.cit., pp. 135 and 347.

Melsol is wide-ranging human rights organisation founded in the
1980s by key activists at the University of PNG. Melsol activists
are effective political campaigners, initially for the West Papuan
nationalist movement in the neighbouring Indonesian province of
Irian Jaya, and for the Kanak Independentistes in New
Caledonia. Melsol is concerned about the preservation of the
environment and the rights of landowners, especially around
resource projects. It has been highly critical of political
corruption, of the undisciplined activities of the security forces
in the Bougainville war and of militarisation and authoritarianism
in the PNG state at large. Melsol leaders took a leading role in
the March 1997 public demonstrations against the Sandline contract.
The offices of several related NGOs were raided by police in April
1997, which led to international protests led by Amnesty
International. Several leaders were charged in relation to the
demonstrations, but later acquitted.

Melsol is closely linked with the PNG Trust for Integral Human
Development (which raises public consciousness about the country's
very liberal constitution); the Individual and Community Rights
Advocacy Forum (ICRAF, which among other services runs a women's
rights office and refuge); and the PNG Watch Council (an umbrella
group for NGOs, a rival body to the National Alliance of NGOs,
NANGO). The most prominent ICRAF figure is Powes Parkop, a former
law lecturer who has often represented dissident soldiers and
General Singirok in court.

These are the PNG Defence Force, the Royal Papua New Guinea
Constabulary (the police) and the Corrective Institutions Service
(CIS, the prison warders).

Yaw Saffu, 'Military roles and relations in Papua New Guinea',
in Viberto Selochan ed., The Military, the State and
Development in Asia and the Pacific, Westview, Boulder,
Colorado, 1991, pp. 221-38.

It was alleged that 12 soldiers had purported to exercise
police and electoral functions between Mount Hagen and Goroka
during the June 1997 elections, but the cases against them were
ultimately dismissed because the State had made a fundamental error
in not identifying those accused of the offence. 'Illegal army
charges thrown out', Post-Courier, 30 July 1999,
p. 3.

Tensions within the military were exacerbated because the
Defence Force could not fund the retrenchment packages of several
senior officers removed by General Singirok, so these men remained
around the Defence bases as a focus of discontent. On the PNGDF in
1997-98, see R. J. May, 'Papua New Guinea', in Charles E. Morrison
ed., Asia Pacific Security Outlook 1999, Japan Center for
International Exchange, Tokyo and New York, 1999.

Kerr, op. cit., p.58. The young woman involved was charged
first, and eventually acquitted for lack of evidence. The MP, Fr
Robert Lak, was brought to the National Court on a carnal knowledge
charge but acquitted in June 1999 on the same grounds.

One Jonathan Kawaro wrote that crime was definitely 'a sure
sign of this great and beautiful country of ours being deliberately
thrown to the dogs by a few self conscious and greedy bunch of pigs
in the so-called 'Haus tambaran' [Parliament House] and their
'princely sum earning' advisors and political boys in high places
(not forgetting the business partners)', Letter to Editor, 'Many
are barely surviving everyday', Post-Courier, 24 December
1998.

The price of rice-which is controlled-rose by 19 per cent in
June 1999. The rice market can indicate economic stress, especially
for townspeople, which is reflected in national politics. Price
rises and the threat of import restrictions preceded changes of
government in 1980, 1985 and 1988.

'Real GDP to rise 4.4 per cent this year, says BPNG', The
National, 14 July 1999.

Curtin, loc. cit.

'Court orders Govt to pay slush funds', The National,
30 June 1999.

Bank of Papua New Guinea, op. cit., p. 31.

Curtin, loc.cit.

Where at least he would have had uninterrupted water, power,
air-conditioning and telephone services, unlike the Prime
Minister's Department in the nearby office block named Morauta
House.

In 1995 Melsol had been the World Bank's most virulent critic
in PNG. Despite (or perhaps because of) their attacks on the Bank,
several non-government organisations, especially Melsol,
subsequently benefited from a K50 000 grant which the Bank intended
to promote the 'civil society'. Melsol leaders obtained a
well-funded office system and vehicle, which were useful during the
Sandline demonstrations and the June 1997 elections. (The figure of
K15 million of World Bank funding for NGOs to be channelled through
Melsol-related bodies has been discussed in PNG, but the are no
hard reports of it ever being paid.). O'Callaghan, Enemies
Within, op. cit., p. 167.

'Govt will pay off Sandline', Post-Courier, 3 May
1999; O'Callaghan, Enemies Within, op. cit., p. 366.
Mr Skate's resistance to paying the Sandline account apparently
related to his use of the issue to discredit former PM Chan.
Against legal advice, Skate insisted the contract was
unconstitutional under PNG law-which it probably was. However, the
document itself specified that any disputes had to be resolved
under British, rather than PNG, law.

'Bishop: Govt must go' and 'Weed out the bad leaders, says
church head', Post-Courier, 1 April 1999.

Chief Justice Arnold Amet's term was coming up for renewal. As
mentioned above, in October 1998 there had been intimidatory
rumours that he would be removed, just as Paias Wingti's government
had removed his predecessor, Sir Buri Kidu. Mary-Louise
O'Callaghan, 'Chief Justice safe in Skate's reshuffle', The
Australian, 21 October 1999, p. 9.

See also 'Baing issues warning to heads',
Post-Courier, 19 February 1999; Franzalbert Joku, 'Back to
the Bank and IMF? Church criticism underscores crisis', Islands
Business, Suva May 1999, p. 16-7.

Jane Ann Lindley (Regional Consultant on Legislative
Institutional Development for the Asia Foundation), Committee
Reform in the National Parliament of Papua New Guinea: Report to
the Clerk of Parliament, Typescript, April 1993.

Yash Ghai, 'Establishing a Liberal Political Order through a
Constitution: The Papua New Guinea Experience', Development and
Change, vol. 28, 1997, p. 324.

Namaliu chose to stay in Mr Skate's Government till the last
day, not just to observe what the Government was doing but because
he was negotiating the $5 billion natural gas pipeline to
Queensland, a project which could greatly improve PNG's foreign
earnings for decades. The National, 7 July 1999.

Geoffrey Barker, 'On thin ice: Skate takes PNG in search of
funds', Australian Financial Review, 2 July 1999. See also
the somewhat exaggerated article by Paul Kelly, 'Australia's spies
put skids under PM', The Australian, 8 July 1999. Mr Skate
had managed to do that himself.

During Sir Michael Somare's 1988-92 term as Foreign Minister
the Taiwanese lent millions dollars to what was Pangu's business
arm, Damai. This paid for a 12 storey office block now owned by the
Somare Foundation. Called Somare House, it is located diagonally
opposite the traditionally-styled Chinese embassy in Waigani. Most
South Pacific countries do not see what the fuss is about between
these two ethnic Chinese countries and have close aid relations
with both.

After mentioning Taiwan, public order and investment issues,
Skate said: 'I am sad to say Australia thinks Papua New Guinea is
their state. Australians think they have to continue dictating to
us. They must understand that Papua New Guinea is more mature. It's
a sovereign State (and) they must respect our views. Australians
are equally trading with Taiwan and why shouldn't we go further to
strengthen our relationship in that region.' He went on to say,
that the issue of the prime ministership had 'nothing to do with
Australians influencing me. It is said that Australians are putting
up Mekere Morauta. The Papua New Guineans (people) should decide
who should be the Prime Minister.' Regarding his resignation, he
said 'I chose that for my members who have been loyal to me and of
course for PNG and it has nothing to do with Australian influence.'
Source: 'Full transcript of Bill Skate's resignation announcement',
Post-Courier, 8 July 1999.

'Change of leadership is not enough, says Waieng'. The
National, 12 July 1999.

'Morauta is new PNG PM after dramatic day of twists',
Australian Financial Review, Australian Financial Review
Net Services Update, 14 July 1999,
wysiwyg://127/http:www.afr.com.au/content/990714/update 56.html;
Mary-Louise O'Callaghan, 'PNG's night of the long knives', The
Australian, 15 July 1999.

Diro was Defence Force Commander from 1975-81. Elected in 1982,
he reached Deputy Prime Minister. Following the 1989 Barnett
inquiry into timber industry corruption he was dismissed from
parliament in 1991 after a Leadership Tribunal found him guilty on
83 charges.

'Problems need more than a change of Govt: Kaputin', The
National, 15 June 1999.

SBS TV, Dateline, 30 March 1996.

R. J. May, 'Postscript: the Organic Law on Provincial
Governments and Local-Level Governments', R. J. May and A. J.
Regan with Allison Ley, eds, Political Decentralisation in a New
State: The Experience of Provincial Government in Papua New Guinea,
Crawford House, Bathurst, NSW, 1997, pp. 386-95.

There are 27 Australian Defence Force technical and training
personnel attached to the PNGDF, which has 3 men on attachment in
Australia, as well as trainees. Australia, Portfolio Budget
Statements 1999-2000. Defence Portfolio. Budget Related Paper
No.1.4A, Canberra, 1999, p. 179.